Promoting Investment in Agriculture for Increased Production and Productivity. Saifullah Syed

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СКАЧАТЬ style="font-size:15px;">      Migration and remittances have recently become a main source of rural household income in many developing countries. They were found to be an important source of investment in agriculture for the development of family farming and particularly for making the shift from subsistence agriculture to market-oriented production. Migration is predominantly a family decision. It is the family that decides whom to send, mobilizes the cost of migration and, in return, receives remittances for the wider benefit of the family. However, it should be noted that large part of remittances are used for immediate consumption, health and education. Only a small proportion, around 10–12%, is invested in agriculture.

      ESSENTIAL REQUIREMENTS FOR ENHANCING THE CAPACITY TO INVEST

      There are several essential requirements for increasing savings and domestic investment in agriculture. They must work in tandem with each other and with sectoral and overall policies. Fulfilling only one of these requirements without considering the others is not likely to be effective in promoting investment.

       Ensure ownership, transferability and transformability of capital through good governance and rule of law

      People save to transfer and eventually transform their savings into capital. For this process to function efficiently, good governance and rule of law are required. To be effective, the legal system must be equally accessible and affordable to all.

       Establish secure property rights, fixed capital and financial institutions

      Fixed capital formation is a driving force for economic growth, development and the reduction of poverty and hunger. The crucial factors that allow for the formation of fixed capital are clearly defined property rights that are applied fairly and equitably to all under the rule of law and the presence of working financial institutions. Secure rights to land encourage investment, and financial institutions enable fixed capital to become a source of investment.

       Allow and facilitate land consolidation to ensure a level of income that is adequate for savings

      In most countries with acute food insecurity and poverty, most of smallholder farmers are not in a position to save. To promote farm-level investment, land consolidation needs to be facilitated to enable farmers to attain a level of income adequate for positive savings. Land consolidation, however, needs to be supported by an exit strategy for those who cannot make a living in agriculture, which generates non-farm income opportunities and provides appropriate social protection measures.

      THE ENABLING ENVIRONMENT

      The enabling environment for making investments depends on essential public goods, such as rural infrastructure, including roads and electricity, which farmers and the private sector cannot be expected to provide. This requires government action and supportive policies and institutions. Market forces that shape investment decisions, which are largely determined by the private sector, can also be influenced by government policies.

      For enhancing the capacity of business to promote agro-industry investment, government can consider a hierarchy of enabling conditions. Essential enablers include land tenure and property rights, infrastructure, and domestic and foreign trade policy. Important enablers include norms, standards, regulations and services relating to production, research and development, and financial services for agro-industries. Useful enablers include the ease of doing business in a country, the business development services available to prospective investors, and the general intensity and effectiveness of business linkages between enterprises in value chains.

      PUBLIC SECTOR INVESTMENT

      Public investment is deemed to be exogenously determined in the sense that political economy compulsions determine the level and composition of public investment. Therefore, increasing attention is being paid to improving budget and the policy making process. The political economy considerations influencing agricultural policy choices includes, among other things, ideas and ideology. These play an important role in explaining agricultural policy choices.

      In many countries, the public sector is making concrete efforts to guide and improve investment in agriculture by developing country investment plans (CIPs), based on predefined development strategies and national priorities. It is important that the development strategy leads to the adoption of policies and programmes that will contribute to increasing farm household savings and investment.

      This report proposes a three-pronged strategy for pro-poor agricultural growth that involves:

      i. Promoting the growth of commercial agriculture and its value chains, using public policy to enable the private sector (farmers and agro-industrialists) to take the lead.

      ii. Shaping the engagement of the public sector in ways that enable as many small farms as possible to link to markets and successfully commercialize by investing their own savings.

      iii. Putting in place support programmes targeted to those small farms that cannot succeed as viable businesses (e.g. facilitating exit strategies for those who cannot succeed in agriculture and enacting measures to promote rural non-farm employment).

      SAVE, INVEST AND GROW

      Farmers who cannot save cannot invest, and any economic activity that does not generate positive savings is not sustainable. Savings are essential not only for increasing the level of capital, but to cover the depreciation of the current level of capital stock. Farmers’ capacity to invest depends on their capacity to save. This report proposes strategies to enhance farm household savings, leading to increased investment in agriculture. They are aimed at facilitating farmers’ own efforts to increase their savings and investment in order to break away from the vicious cycle of poverty and enter the virtuous cycle that can be described as ‘save, invest and grow’.

      CHAPTER 1

      Introduction

      The beginning of the third millennium has witnessed a number of initiatives to eradicate poverty and food insecurity. The United Nations Millennium Summit in September 2000, which followed the World Food Summit of 1996, agreed on eight Millennium Development Goals (MDGs). One of the key MDGs is halving global poverty and hunger. The MDGs are part of a broader attempt to encourage the international community to join forces in making a difference in the developing world. Driven by these initiatives, development cooperation entered a phase of renewed growth and emphasis. The Organisation for Economic Cooperation and Development (OECD) and the Group of Eight (G8) countries made commitments to increase assistance to the developing world. During the United Nations Conference on Sustainable Development (Rio+20) in June 2012, the Zero-Hunger Challenge was launched, which calls for an end to world hunger.

      The development concerns of developing countries also formed an integral part of the 2001 Doha Ministerial Declaration. Recognizing the fundamental principles of the World Trade Organization (WTO) and relevant provisions of the General Agreement on Tariffs and Trade (GATT) in 1994, the Doha Ministerial meeting agreed to pay special attention to the concerns of the developing countries. On the assumption that global food supply was sufficient to meet the global food demand, the WTO agricultural negotiation focused on how to improve market access of food-importing countries.

      However, in 2008, soaring food prices changed the world food security situation. СКАЧАТЬ